The Obama Administration’sDepartment of Education has been working for months on an attack that would severely cripple career colleges in the United States, schools that help American students pursue educational options outside of the four-year non-profit universe.

Charging that these career colleges mislead students into believing they’ll obtain employment upon graduation, and that these schools mislead students into taking on debt, the Administration has proposed a “gainful employment” rule that would severely limit students’ financial aid options if they chose for-profit colleges over the Administration’s preferred four-year university route.

According to sources, the “gainful employment” proposal has been fueled by reports from the U.S. Government Accountability Office (GAO) as well as news media that have painted the career university system as predatory. However, many of these reports, including the one from the GAO, were revised after questions were raised about the accuracy of their initial drafts – and many of these reports fail to provide information about similar tactics and return on investment data for four year schools, a mis-step that, this week, Jamie Farrell at Forbes brought to light.

As congressional talks surrounding the negative impact online education has had on graduation rates and specifically loan default rates; what we are not hearing are long term solutions. We are hearing suggestions of Band-Aids.

Do I like the idea of the gainful employment laws? Yes! That said, if we are going to implement them, it should be done across the board and it needs government support to get started. What these lawmakers are failing to recognize is that it took guts, innovation, large investments and a lot of time NOT being profitable for these for profit online education companies to get where they are today…and the model is less than TEN YEARS OLD.

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Big Government has covered the Obama Administration’s war on career colleges before, particularly the the Wall Street connections: noted short-seller Steve Eisman, who’s testimony in front of the Department of Education and in Congressional committees is shaping the Administration’s policy and potentially earning Eisman millions. Now, it seems Eisman is trying desperately to distance himself from what appears to be a destructive policy for America’s low-income and minority students.

Recently, the Administration and Education Secretary Arne Duncan proposed that career colleges and other for-profit educational institutions, be governed by the so-called “gainful employment rule” – a rule that limits or ends federal grant and student loan money for students at for-profit institutions with low graduation rates or low post-graduation employment. Although for-profit schools face essentially the same problems as not-for-profit institutions, students at for-profit schools tend to be lower-income and minority communities, who rely heavily on government assistance to earn the kind of education and skill level necessary to succeed in today’s harsh economic climate.

The rule has met with overwhelming opposition from a number of organizations and communities, and much of that criticism has been leveled at how the Administration came up with the “gainful employment rule.” Recently, it’s become apparent that Steve Eisman’s testimony motivated the Administration’s actions, even if he’s reticent to admit it.

From Business Week:

On April 16, Eisman met with Education Department officials, including acting deputy assistant education secretary David Bergeron, according to Justin Hamilton, a department spokesman. He sent multiple e-mails to a number of Education Department officials, including Duncan, on May 28, two days after airing his views at the Sohn conference in New York. He warned against the watering down of gainful employment, according to the documents obtained through a Freedom of Information Act request…

‘He shared a PowerPoint that he intended to use for a speech he was planning to give in May,’ Bergeron, the acting deputy assistant education secretary, said in a telephone interview. “It would have been inappropriate for us not to meet with someone that indicated that he had done serious research on the industry.’”

That Power Point contained some very important suggestions, designed to target the problem Mr. Eisman believed for-profit education was causing. One of those suggestions was a very coincidentally named “gainful employment” rule on slides 33 and 34 of his extensive presentation.

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Over the last several months, as attention has been focused elsewhere, the Obama Administration and Education Secretary Arne Duncan have been waging a quiet war against for-profit schools and universities – educational institutions that offer  job training and degrees in in-demand fields to students looking for an alternative to four-year non-profit schools, or a more accessible price tag.

The Administration has fired a number of rounds at the industry, but recently unveiled it’s secret weapon: a “gainful employment” restriction on federal loan money available to students at for-profit schools. While for-profit schools have had their difficulties, their deficiencies aren’t that dissimilar to those of their not-for-profit counterparts, but this weapon could kill off for-profits as a viable option to not-for-profit education. Essentially, students at for-profit schools that have either a low graduation rate or an unacceptably high number of unemployed, graduated students would be denied federal student loan and grants. As Forbes points out, these schools serve primarily lower-income and minority communities who depend so heavily on student loans, such a restriction could put the whole industry in jeopardy.

Which, of course, is exactly what the Obama Administration would like to see happen. And, from recent news, it seems that they and their network of associates will do just about anything to make sure it happens.

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